Sixteenth Finance Commission Chairman Arvind Panagariya on Tuesday said the West Bengal government has urged the panel to increase the transfer of taxes to the states from 41 percent to 50 percent, while suggesting significant changes in the rules for weighting the horizontal allocation.
Panagariya, who was in the city, said that most of the 13 states that the commission visited so far wanted to increase the tax to 50 percent, while many states asked the team to increase it to 45 percent from the existing 41. percentage.
“On the transfer of funds, the West Bengal government, in its request, wants the share transfer to be increased to 50 percent,” said the commission chairman.
Direct reduction of funds is the distribution of tax funds between the Center and the regions in the country.
Chief Minister Mamata Banerjee met the commission on the proposals and raised the issue of “dispossession of this institution”.
The state proposed the introduction of a new urban-based weight of 7.5 percent in the framework of the horizontal zoning process, while recommending the extraction of forest and nature as a criterion, which had a weight of 10 percent in the Fifteenth Finance Commission.
The state government has also proposed to adjust the population weight to 10 percent in the granular method of calculating the population of Scheduled Caste (SC) and Scheduled Tribe (ST) to better reflect the demographic realities, officials said.
In terms of tax efficiency, West Bengal has recommended a weightage of 2.5 percent.
The government has also proposed that the population increase to 20 percent, from the 12.5 percent recommended by the 15th Finance Commission, they said.
Highlighting the state’s fiscal challenges, Banerjee advocated for raising the income tax rate from 45 percent to 50 percent, saying the amendment would address the disparity in income distribution across states and help resource-starved states like West Bengal.
The Mamata Banerjee government has also asked the commission to increase the weightage of the ‘local’ criteria to 20 per cent from 15 per cent for the rehabilitation of complex areas.
Panagariya, who chaired the meeting, accepted the state’s submissions and assured that the commission will consider the proposals after consultation with all 28 states, which will continue until mid-May.
In the afternoon, the five-member delegation also met with trade associations, industrial associations and representatives of political parties. The Finance Commission is tasked with recommending the distribution of tax revenue between the Center and the states.
